Airbnb Allows Cities to Both Shrink and Swell, Says CEO Chesky

Eight years ago, Airbnb cofounder and CEO Brian Chesky was a struggling graphic designer hoping to come up with rent money by inviting people attending a conference to stay at the San Francisco apartment he shared with roommate, Joe Gebbia. Today, the 34-year-old Chesky is the chief executive officer of a $25 billion company that offers lodging in 1.7 million private homes across the planet. It, along with companies such as Uber, is part of a fast-growing sharing sector that already is altering—some say disrupting—traditional players in the marketplace.

At the opening session of ULI’s Fall Meeting in San Francisco, during which he was interviewed by Constance B. Moore, president and chief executive officer of BRE Properties, Chesky insisted that transformational change does not have to be a zero-sum game. To the contrary, he explained, the revolution he helped launch actually will help hotels and other traditional hospitality providers to prosper as well by helping drive overall growth in the industry.

“We have more inventory than anybody in the world, yet hotels still have record occupancy, too,” Chesky said. “For us to win, nobody in hospitality has to lose. Travel is a $2 trillion market: it’s starting to rival the oil industry.”

Airbnb is not necessarily a direct competitor to hotels, he said, because its lodging shares often are located in residential neighborhoods rather than the downtown locations that big upscale hotels favor because of their convenience for business travelers. And because Airbnb can scale up quickly to meet temporary surges in demand, it actually can help cities host major sports events and conventions without adding costly lodging capacity that may be underused over the longer term.

As a prime example, Chesky cited the 2014 FIFA World Cup in Brazil, during which 120,000 people stayed with Airbnb. “They didn’t have enough hotels there because they couldn’t justify [the capacity] once you got past the World Cup,” he said. “We enabled cities to swell.”

Though Airbnb reduces the ability of hotels to charge higher prices in such high-demand situations, he said, the overall effect of accommodating more visitors is beneficial to local economies.

The sharing sector has met its share of resistance from local government officials, some of whom see it as a potential safety hazard to customers. But instead of opposing regulation, Chesky argued that it is crucial for sharing companies to work with governments to develop the rules. He lauded the city of San Jose, California, which in 2014 enacted a statute that clarified the legal status of lodging shares by allowing homeowners to rent to guests whenever the owners are present and for 180 days a year when they are away. The city also worked out an agreement under which Airbnb would collect local hospitality taxes, according to Airbnb’s website.

Chesky said other cities are looking at similar legislation, but navigating the maze of local regulations remains a challenge. “We’re in 34,000 cities with different regulations around the world,” he explained. France has solved this problem by enacting uniform national regulations, but he does not expect such a solution in the United States.

Chesky said Airbnb maintains its own quality standards and hired veteran hotel executive Chip Conley in 2013 to help establish companywide consistency. Airbnb uses reviews from guests to evaluate hosts and has dropped thousands of hosts who got poor grades, he said.

But even as Airbnb continues to grow, Chesky is envisioning the next phase of its evolution in which hosts offer additional services. (TechCrunch has reported that the offerings may range from bike tours to home-cooked meals.) “You go to a city to have experiences,” he said. “In the future, we’re envisioning 30, 40, or 50 different ways that a person could host in a city.”

As for disruption, “I’ve never been in love with that term,” Chesky said with a laugh. “When I was disruptive in class when I was growing up, that was never a good thing.”

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